TORONTO (miningweekly.com) – Vancouver-based Rusoro Mining has received “highly encouraging” results from a preliminary assessment on expanding production at the company's Choco 10 gold mine, in Venezuela, and now plans to complete a feasibility study on the expansion project by the second quarter of next year.

According to the study, the company could increase steady state production at Choco 10 to more than 500 000 oz/y, over a 12-year mine life, at average cash costs of just $331/oz.

Rusoro bought the Choco 10 mine from Johannesburg-based Gold Fields in 2007.

"Simply put, this is the reason why Rusoro purchased the Choco 10 mine; not for what it produces today - on average 120 000 oz a year - but for what we think it can produce in the near future,” said president George Salamis.

The company has an “aggressive” plan to move the Choco 10 expansion to production by the end of 2012, he said.

According to the preliminary assessment, or scoping study, the capital requirements for the expansion are estimated at $208,5-million, plus contingencies of $30,8-million and sustaining capital of $80,3-million for the life-of-mine.

Once the expanded plant is commissioned, payback on the project is estimated at 2,1 years.

The scoping study evaluated three options for expanding production – the construction of a new 10 000-t/d mill, increasing throughput to 20 000 t/d through a new mill, or increasing milling capacity to 20 000 t/d using a combination of the existing 5 000-t/d capacity and new milling facilities.

The third option – a combination of the existing facility plus an additional 15 000 t/d of new capacity – has been identified as the optimal case, Rusoro said.

Gold production from the expanded mine and mill facility is forecast to reach a peak of more than 717 300 oz in year ten of operation, with an average rate of 558 200 oz/y post expansion.

The best financial returns would likely be generated by employing contract mining, rather than an owner-operated mining fleet, according to the preliminary assessment.

Ore will come from the existing Choco 10 operation (comprising the presently operating Rosika, Coacia and Pisolita openpits) and planned mine production from the Villa Balazo-Karolina (VBK) pit at Choco 10 and from Rusoro's Increible 6 concession, which is located four kilometres north-east of Choco 10, as well as from two other small deposits.

As well as a definitive feasibility study, Rusoro also aims to complete an environmental-impact assessment by the second quarter of 2010, and will start infill drilling at both Choco 10 and Increible 6 in the coming months.

Updated measured and indicated resource estimates for both deposits will be released by the end of this year.

Rusoro shares gained 1,12% on Tuesday, to C$0,45 apiece by 15:21 in Toronto.

Last year, the company launched an unsolicited takeover bid for Gold Reserve, which plans to build a large gold and copper mine at its Brisas project, in Venezuela.

Gold Reserve has been unable to get government permission for the project, and Rusoro had argued its relationship with the State would help it succeed where the US company failed.

However, Rusoro withdrew its takeover bid in February, after Gold Reserve successfully applied for an interlocutory injunction restraining Rusoro from going ahead with the bid until a trial into whether Rusoro's adviser on the transaction, Endeavour Financial, had had inappropriate access to confidential information, after advising Gold Reserve on a previous matter.

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